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June 27, 2014

Employee Retention and Its Effects on the Organization


Employee turnover has been a subject of interest to scholars of organizational theory and development for some time. Employee turnover affects every type of business from manufacturing to service and is costly and disruptive to productivity. This phenomenon, according to Flaherty (2005), is a serious issue for the business community as well as for the general community of society. At exit interviews, employees cited being displeased with management as the cause for leaving the organization. Eisenberger, Cummings, Armeli & Lynch (1997) stated that employees in the fast food industry leave because of low salary, a desire to improve one’s quality of life, and poor management.
When an employee voluntarily terminates his or her employment, exorbitant expenses occur. Brockner (2006) stated that the organization must bear the responsibility for both direct and indirect expenses associated with the costs of turnover. Exit interviews, recruitment, applicant testing and interviewing, along with placement of the worker are some examples of direct costs associated with employee turnover. Berta, Hayes & Barrier (2004) stated further that those indirect costs of employee turnover, such as lost knowledge, productivity, experience, employee morale, customers and profits, have serious implications for the success of most organizations. Additional indirect costs include the responsibility to train, monitor, and measure the performance of new employees.

In this research paper, we will be discussing that what causes employee retention and its effects on organization. We will study what are the concepts behind retaining valued employees and also what are the best methods of retaining them. This study also brings forth the issues that hamper the success of our employees and compel them to leave an organization or switch jobs.
Our research problems will include the evaluation of different methods to retain employees, their problems and requirements for better job satisfaction, the underlying reasons behind employee turnover, assessing the organizational offerings and its impact on potential employees especially with respect to compensation mechanisms, their morale and influences on the morale, their overall performance and general apprehensions, their need to be given job security, and other such problems. This intends to offer us with an insight as to how well and how best can the company retains its true performers and at the same time maintains its efficiency as an entity.

Employee retention is a fairly difficult phenomenon if the organization does not know what it should do. Few of the research questions enlisted below will develop our understanding about the aspects involved in employee retention:
1.      How training and development influences an employee decision to remain with the organization.
2.      How a reduction in employee turnover positively influences an organizations financial outlook.
3.      What are the factors that lead an individual to quit jobs?
4.      What are the measures that can be taken to ensure higher job satisfaction?
5.      What are the measures for recognizing superior performance and how these affect the organizational strategies?
6.      How can employees be influenced to improve rather than quit?
7.      What are the reasons behind employee turnover?
8.      What should the organization be doing to inculcate a spirit of loyalty among employees?
9.      How can an organization ensure its best employees remain loyal and satisfied?
10.  How do monetary and non-monetary compensation plans helpful in retaining the best employees?
The research paper aims to formulate methods of retaining the best employees in an organization. It intends establishing and analysing methods to retain employees and formulate policies that result in better employee satisfaction. This study helps us to recommend the best practices to the organization for keeping their valued employees in high regard and esteem.

Employees are the backbone of any organization. We are embedded in a highly competitive market, which is why companies have realized the importance of attracting and retaining the best employees, and that only trained and capable organization can survive and grow. In this way companies treat their employees like the most important assets that have a great competitive advantage over those who do not.
Employees or "internal customers" are a very important marketing tool, because they deal in many occasions and in professions such as aesthetics even more of the relationship between the establishment and customers (Aselage & Eisenberger 2002). They become the visible face of the organization, a mirror that reflects the values ​​of customer-facing business, and largely end up being responsible for customer loyalty. Being aware of this situation, especially for those institutions who wish to remain a role model, is essential. To achieve expected results, an organization must have the commitment of its employees.
According to several investigations on this subject, the three main reasons why employees choose to resign from an organization are:
1.      When they see that the company lacks leadership or vision.
2.      When concerns arise about the way management treats employees.
3.      When they have no administrative support in areas such as the revision of performance evaluation and employee growth. 




Retention of employees is considered to be a method in which the staffs of a company is encouraged for remaining within the organization for a period of maximum time or until a required project is accomplished. It is considered to be beneficial for a company, as well as, for its employees (Buckingham 2000).
            Breukelen, Van & Steensma (2004) stated that upper management could improve a supervisor’s relationship with his or subordinates by emphasizing the need for training and development of supervisors, especially new supervisors. Exit interviews have shown that the retention problem rests with management; however, many employers have not responded to the crisis. A survey conducted in 32 countries asked 9,700 employees to respond to what they expected of their employer. The employees responded by identifying care, concern, and fair treatment as primary factors for joining and remaining with an organization. For employees to feel committed to their workplaces, management needs to establish strong positive relationships with them. Employee retention is difficult when an organization has a management system that does not show concern for its workers (Capko 2007).

The best way to retain employees starts off from the phase of recruiting. Attracting new employees and then retaining them may not be two similar things, but each one reinforces the other in real sense (Aik & Tway 2006). These functions require creating a repute of the organization internally as well as externally so that good employee generation is possible and once employees are hired, they may be so satisfied that they do not want to leave. If the organization represents itself more realistically, it will create an impression on the employees and will result in positivity all the way (Breukelen, Van & Steensma 2004). However, employees too have to be honest while passing through the recruitment phase. They must be true in whatever they say about their expectations, culture, and demands and about the organization itself.

Communications comes hand in hand with satisfaction and retention. It is believed that communication between the employees and the employers goes a long way in establishing a trusting relationship between them. Once this trust develops, the parties can share their opinions and views most willingly without any hesitation. Once employees know they are being heard, they may not feel dissatisfied even if the organizational health is not ensuring extra ordinary benefits for them. Amos & Weathington (2008) believes that the imprinting period of a new employee is probably less than two weeks. Employers must engage the employee early on by sharing how important the job is for their collective and individual motives.
A lack of communication within the organization results in a gap between upper and lower management. It deters to create a link between what the employers expect the employees to do and what the employees are actually achieving. There must be a common purpose and trust among employees (Amos & Weathington 2008). Only then can they work together with the employers in achieving corporate goals. An atmosphere must be created in which employees feel comfortable making suggestions and trying our new ideas.



It is imperative that employees feel like an asset to the organization and they should be treasured. Training helps underscore this message. Training your employees is a practice that shows that the management is concerned towards the employees and wants to see them doing better and bigger. Good training programs not only polish the skills in the employees but are also a positive reinforcement in their behaviors. Good training can de-emphasize salaries and benefits, in part by building a positive work environment and by giving employees advancement opportunities. Training helps strengthen employee loyalty and can help revitalize personnel in terms of their organizational performance (Bennis 2007).

A good organization remains competitive in terms of compensation and benefits. However it is the relationship with the employer and supervisor that is often a crucial factor in determining whether a person stays on board or leaves the company for good. Employees expect more interactive environment within the organization where they can be empowered to share ideas and opinions, can show more self satisfaction while on job and control over the actions that directly impact on them (Breukelen, Van & Steensma 2004).
Departments should encourage innovation by soliciting the advice and input of their staff members, followed by responses to ideas, complaints or questions. People have a right to be recognized for their accomplishments in the workplace. In most organizations, the only negative contributor towards high turnover rates is the feeling among the employees that they are not being adequately recognized for whatever efforts they are putting in. Hence personal and team recognition programs are especially important in recognizing their toil and hard work. It also serves as a motive for non-performers to assess their weaknesses and cherish others and improve upon themselves (Capko 2007). These employees can be recognized through awards, monthly announcements of best performers, gifts, memos, mentioning them in meetings, asking for their opinions in important matters and similar other steps.

Compensation and benefits may be an important component of higher employee morale but it is not everything that employees look for in the first place. Money may be the reason they give when they resign, but its like “white noise” (Abbasi & Hollman 2000). They are conscious of it for a while but if they are bored on the job, money alone is not going to keep them there.

Factors that Drive Employee Turnover and Job Satisfaction
Employees quit for many reasons. Some leave for better paying jobs elsewhere. Others depart because they do not fit the culture. Many more exit because their managers and supervisors are not properly trained. In general, there are five important areas that motivate people to leave their jobs.
1.       Poor match between the person and the job
2.       Poor fit with the organizational climate and culture
3.       Poor alignment between pay and performance
4.       Poor connections between the individual, their coworkers, and the supervisor
5.       Poor opportunities for growth and advancement
These five P's can be addressed successfully. Employee retention begins by paying attention to what causes low job satisfaction as well as what attracts, retains, and motivates your workforce. Here are several reasons talent management and employee retention strategies fail in many organizations.
1.       Not connected to the vision, mission, and the organizational values
2.       Top leadership not involved
3.       Not part of the organizational management strategy
4.       Not tied to the bottom line
5.       No clear goals and objectives
6.       No one held accountable
7.       Delegated to the HR department

Cost of Employee Turnover
The cost of attracting, recruiting, hiring, training, and getting new people up to speed is much more costly, as well as, wasteful. In addition, productivity is directly linked with the retention of employees. Studies have also suggested that employees have an average attitude towards their work that is intended to generate thirty eight percent higher customer satisfaction scores, twenty two percent higher productivity, and twenty seven percent higher profits for their companies

High employee turnover is a serious concern for many business leaders. Perhaps the most visible aspect of employee retention, or the lack of it, is the effect that retention has on the financial and social status of the organization. When a worker resigns from an organization, the company faces the challenge and the cost to replace him or her and maintain the morale in the workplace. This phenomenon has created economic and social crises for many organizations.
Employees want managers who will listen to them regarding their concerns, and they want to feel valued, supported in their endeavors and know that their work does make a significant contribution toward the organization’s goals. When a person shows concern for another human being, positive effects occur relative to commitment, trust, and gratitude. Employees, for example, who perceive that management is concern, supportive and respectful may commit to the organization. Allen, Shore, Griffeth (2003) stated that managers perceived as being disrespectful toward their subordinates create a problem relevant to trust and because of mistrust, employees become cynical about the organization’s leadership.
Although high employee turnover costs companies billions of dollars per year, some managers refuse to acknowledge the problem. Many CEOs and senior managers, according to Capko (2007) did not consider employee turnover a problem until the organization started to experience financial and social problems. During the industrial era, employers did not concern themselves with turnover because employees remained loyal to the organization, despite the inhumane treatment imposed on them by management. The literature revealed that senior managers are now developing strategies to reduce turnover whereby their organizations can remain competitive in the labor market. Without concern, support, and commitment from upper management, high employee turnover will remain a social ill that threatens the stability of businesses as well as the broader community.


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